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Monday, April 11, 2016

Supply Chain Slump "Worse Than The Great Recession"

Submitted by Tyler Durden on 04/11/2016 08:38 -0400http://www.zerohedge.com/news/2016-04-11/supply-chain-slump-worse-great-recessionSubmitted by Jeffrey Snider via Alhambra Investment Partners,
Not to continue beating a dead horse, but I have a stick and the carcass is right in front of me. The
entire supply chain inside the US economy is full agreement both on
where the economy is right now and, perhaps more importantly, how it
came to be that way. Such harmony is not atypical, as synchronicity usually defines the hard edges of any cycle. This,
however, is something else entirely, especially as it stretches back
years and confirms we are witnessing nothing like the usual.As it is, this latest part or phase or whatever has already taken up nearly two years. In terms of wholesale sales, as noted this morning, overall sales peaked in July 2014 – meaning nineteen
months (thru Feb 2016) of deceleration into sustained contraction.
Worse and what is probably the most concerning is that after those
nineteen months inventory is only just now starting to correct, and it
is doing so ever so gently. That suggests again slowdown without yet any visible end.
In that sense, recession might actually be the best case since it would
greatly speed up the affair in at least the convergence and reversion
of inventory to sales (though that would still leave questions about the
economic trend after it).By comparison, the Great Recession featured just nine months of contraction; the whole of the dot-com recession twelve. Those were both top to bottom, peak to trough, over and done with. In 2016, we are very likely facing two years and still only the beginning
of reconciliation or balance, and no idea what that might mean further
down in wider economic feedbacks and negative multipliers.

The supply chain, top to bottom:

One other noteworthy interpretation: to find the “goods
economy” including the whole of the supply chain in such joined, steady
dislocation cannot be anything but a negative comment on the whole of
the economy, services included. That starts with the fact
that a significant portion (as much as half) of the “services economy”
directly addresses the “goods economy” (retail, wholesale,
transportation, etc.). Beyond that, if there is total breakdown in
growth and advance in goods that can only mean a serious problem with US
consumers. It has already forced economists and policymakers to
completely abandon what was in late 2014 and early 2015 inarguable
recovery and success. Just because it has not, so far, acted like
recession does not propose a clean bill of health (just like it did not,
last year, recommend this was all some temporary slump worthy of
nothing but dismissal). Instead, that it has continued on for so
long suggests quite the opposite, and, again, likely worse than just
recession prospects in the long run.